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Two thirds of tax cuts from mini-budget reversed Two thirds of tax cuts from mini-budget reversed
(32 minutes later)
The government will reverse two thirds of the tax cuts it announced in September's mini-budget, new chancellor Jeremy Hunt has said. The government will reverse "almost all" of the tax cuts announced in last month's mini-budget in an emergency move aimed at calming investors.
Mr Hunt said the emergency reversal aimed at calming investors totalled £32bn, with "almost all" of the £45bn pledged tax cuts reversed. New chancellor Jeremy Hunt said his new measures, which include reversing a cut in income tax, would bring in £32bn.
His priority was to restore "economic stability", said Mr Hunt. The move comes after economists warned the original tax cutting plans would leave a £60bn black hole in the public finances.
Among the measures to be reversed are plans to cut the basic rate of income tax from 20p to 19p from April. Mr Hunt said his priority was to restore "economic stability".
Other measures to be axed include: The government's mini-budget on 23 September sparked alarm among investors, with plans for huge tax cuts without any detail on how they would be paid for.
Cuts to dividend tax rates "At a time when markets are rightly demanding commitments to sustainable public finances, it is not right to borrow to fund this tax cut," added Mr Hunt, referring to the plan to bring down the basic rate of income tax.
The reversal of off-payroll working reforms IR35 introduced in 2018 and 2021 He noted that the instability on financial markets had a wider impact affecting "the prices of things in shops, the cost of mortgages and the values of pensions".
VAT-free shopping for non-UK visitors Immediately after the mini-budget, investors began demanding higher rates of interest to lend to the government as the UK was deemed a higher risk investment and borrowing costs surged to worrying levels.
The freeze on alcohol duty rates The turmoil forced pension funds to sell bonds due to concerns over their solvency, and threatened to create a downward spiral in bond prices as more were offloaded which left some funds close to collapse.
The Bank of England was forced to step in to buy bonds to try and stabilise their price.
The turmoil also fed through to the mortgage market, where hundreds of products have been suspended due to concerns about how to price these long-term loans.
The Institute for Fiscal Studies (IFS) warned last week that that the chancellor would need to make "big and painful" spending cuts to put the country's finances on a sustainable path.The Institute for Fiscal Studies (IFS) warned last week that that the chancellor would need to make "big and painful" spending cuts to put the country's finances on a sustainable path.
The think tank predicted that with a weaker economy and promised tax cuts, there would be a large shortfall in revenue.The think tank predicted that with a weaker economy and promised tax cuts, there would be a large shortfall in revenue.
It calculated the government would have to spend £60bn a year less by 2026-27.It calculated the government would have to spend £60bn a year less by 2026-27.